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Deficit reduction policies must not ‘hit’ small firms

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A business group has urged the government to combat the budget deficit in a way that does not harm smaller firms.

The Forum of Private Business (FPB) was responding to figures released by the new Office for Budget Responsibility (OBR) suggesting the UK economic growth for next year will be lower than previously forecast.

The OBR predicted that the economy would expand by 2.6 per cent next year rather than the 3.25 per cent forecast in the last Budget.

Matt Goodman, the FPB’s head of policy, said: “These are more realistic projections of growth which reflect feedback from our member businesses and the general mood of the economy at the moment.

“The government has a difficult task in this emergency Budget. While addressing the gaping public deficit in order to stabilise the economy must be the first priority, this must be balanced with continued support for the drivers of growth – small businesses.”

Mr Goodman added: “With spending as tight as it is, the government needs to reinforce the concept of helping businesses become better at doing business. That means clear, bold policies designed to foster an environment of better financial management, forge stronger links within the business community and free business owners to choose how their money is spent.”

The FPB has listed a number of proposals it would like to see in the forthcoming emergency Budget.

These include clarifying cuts in corporation tax and changes to capital allowances.

Capital gains tax changes should include an increase of the threshold for entrepreneurs’ relief.

In addition, there should be an extra £500,000 of relief for owners who reinvest in small businesses as part of a private or co-investment arrangement.

A review of business regulations should accompany the upcoming comprehensive spending review.

In the view of the FPB, the government needs to look at helping local authorities set up ‘business engagement’ plenary sessions as a way of promoting dialogue within local economies.

Employment regulations should be made fairer and more balanced, too, starting with a wholesale review of employment laws and a change in the legislative approach to relationships between employers and their staff.